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Cash crunch leaves leather industry in the lurch

The leather sector is feeling the heat of demonetisation. With uncertainty looming over their future, industrialists say the ban on old notes of Rs. 500 and Rs. 1,000 denomination has affected every aspect of the sector, from purchase of raw materials to payment of weekly wages.

Tanners say the sector had been badly hit after the Centre declared last week that the two currencies would cease to be legal tender. Areas in Vellore such as Ambur, Vaniyambadi, Ranipet and Pernambut are home to several leather and footwear outlets.

“Demonetisation has affected the industry very badly. Workers have been badly hit. We pay a part of the wages for services like overtime on a weekly basis. Following demonetisation, we have not been able to make these payments,” said S. Faiyaz Ahmed, honorary secretary of Ambur Tanners Association.

The tanneries have been grappling with absenteeism for the past one week, he said, adding: “Workers take permission to stand in queues in front of banks and ATMs. This takes four or five hours a day. Sometimes, they have to go back the next day if there is no cash. This is affecting work at tanneries.”

Tanneries were also having trouble getting supply of raw skin. “The first sellers of skin are butchers. These butchers are paid in cash. Now, we are unable to purchase raw skin,” Mr. Ahmed said.

Tanners were faced with lack of cash to pay for transportation. Skin was transported from many parts of India such as Maharashtra and Punjab. A part of the freight charges was paid to drivers on delivery and this was used towards fuel, toll charges and return journey.

Tanners said many trucks were stranded here as they were unable to pay them and drivers did not have money to return home. On the production side, supply of coal for boilers was hit. Coal was supplied from parts of Rajasthan and Andhra Pradesh.

M. Rafeeque Ahmed, chairman of the Council for Leather Exports, said tanners required cash to run the factories on a day-to-day basis. “We do not know what to do. Demonetisation has created confusion. Companies are permitted to withdraw cash of up to Rs. 50,000 but even the smallest company will need more,” he said.

He questioned why there should be restriction on withdrawing cash from one’s bank account. “The government should relax the cash withdrawal limit from accounts as this is accounted for and can be captured by the Income Tax Department,” he said.

Mr. Ahmed said it had been 10 days since the demonetisation was announced, but big problems awaited industries in the coming days. “We will not be able to operate our businesses. Demonetisation was a good idea but it was implemented with absolutely no knowledge of the ground reality. It should have been implemented without affecting the public and trading community. Rural economy will be hit,” he said.

Mr. Faiyaz Ahmed said that every aspect of the industry had been affected. “More than the demonetisation, the non-availability of new currencies is the main problem. Even routine banking work such as cheque clearance and electronic transfer of money are affected as bank staff are busy with cash exchange,” he said.

N. Sundar, district secretary of North Arcot District Tannery Workers Union, said there were 1.5 lakh workers in leather and footwear industries in and around Ambur. “They are unable to get cash for urgent needs and are running around for money,” he said.http://www.thehindu.com/news/national/tamil-nadu/cash-crunch-leaves-leather-industry-in-the-lurch/article9363254.ece#